When applying for a used car loan, you will most likely consider only the interest rate payments and the applicable GST charges. However, lenders often charge additional fees, which you might overlook at the time of application.
Then if you’re not careful, such charges might affect your repayment structure and increase the overall cost of the loan. So before you apply for a loan, know about these second-hand car loan charges-
1. Processing fee
This is the basic fee charged by all the loan providers. It is a one-time charge that the lender levies to process your application. The used car loan processing feevaries from one lender to another. You have to this fee separately as it is not deductible from the loan amount. Moreover, since it is a single payment, it is not refunded if you cancel the application later.
Additional read: Want a Used Car Loan? Here’s What You Should Know
2. Late payment charges
Late EMI payments can usually attract late payment fees. Depending on the lending institution, these charges may be between 2-3% on your EMI amount. In addition, it may also include a penal interest which is an additional interest charged by the lender on the outstanding EMI if you fail to make the monthly payment on time.
So, it is best to pay your EMIs on time and avoid these charges. For this, you can use a used car loan EMI calculator tool to arrive at a comfortable repayment plan.
3. Foreclosure charges
When you get loan approval, the agreement states the repayment tenure within which you have to repay the borrowed amount. If, however, in the future, you have enough funds available and wish to make a single payment to close the loan before the tenure ends, the lender will charge you a penalty in the form of foreclosure charges.
In most cases, lenders charge a percentage of the outstanding amount as the used car loan pre-closure charge.
4. Part pre-payment charges
Part pre-payment is when you can pay off a part of your loan by making larger payments over the EMI before the actual due date. This helps reduce the debt burden and makes your interest payments more affordable. Then, the lender might charge you a pre-payment penalty against this payment.
5. Documentation charges
Apart from the standard processing fee on loan, the lender might also charge you a minimal documentation fee. Once you apply and submit the various documents, the lender will verify your personal and income documents as well as the paperwork associated with the used car purchase. This process might incur certain costs which you need to pay as documentation charges.
Additional read: 4 things to keep in mind before you buy a second-hand car on loan
The bottom line
Now that you’re aware of the various charges consider them to calculate the cost of your loan before applying. And when you’re searching for reliable finance options, get in touch with us at Tata Capital!
At Tata Capital, avail of a quick second-hand car loan at attractive used car loan interest rates and an extended tenure of 60 months. Enjoy seamless application process and swift processing for hassle-free borrowing.